If you've made a New Year's resolution to grow your savings account in 2022, you're not alone. In a recent Fidelity survey, 43% of people considering a financial solution said saving more money was one of their goals.
American economies have exploded in the last two years. The personal savings rate, the percentage of disposable income Americans save each month, peaked at 33.8% in April 2020, because many things you used to spend money on, like dining, entertainment, shopping and vacations, they were not available during the early days of the pandemic era.
Savings rates dipped slightly as the economy reopened but remained extremely high by historical standards for months.
By November, this figure had dropped to 6.9%, its lowest level since December 2017. In fact, the landscape for savers is changing rapidly and there is every chance that it will be even harder to save in 2022.
Looking for ways to save money now?
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high inflation
Consumer prices in the United States are rising at a record pace thanks to a surge in demand for goods coupled with a global supply chain crisis, and the situation has only been exacerbated by persistent labor shortages.
In November, prices were 6.8% higher than the same period of the previous year, with inflation in some categories, such as meat and gasoline, well above.
The Federal Reserve is expected to withdraw its support for the economy in the coming months to help prices stabilize again (more on that later), but the process will be slow.
In the meantime, be prepared to pay more in 2022 for basic necessities like groceries, gas, clothing, and even home heating costs and eating junk food like Oreos and Sour Patch Kids. And if you have a major purchase to make, like buying a car or a house, be prepared for especially high prices.
Personal loans can help you in times of need
A personal loan from Credible can help you mitigate losses and get back on track. In the past two years, Congress has authorized three rounds of federal stimulus payments to help Americans weather the pandemic.
Experts say that the collection of these payments, capped at $1,200, $600 and $1,400 per person, has reduced debt, increased savings accounts and even helped lift families out of poverty.
As part of the US bailout in March (the same bill that authorized the third stimulus check), Congress authorized a significant, albeit temporary, expansion of the Child Tax Credit (CTC) for 2021 to $3,600 per child. child and allowed eligible parents to receive half of their credit in six monthly installments.
The last prepayment of the 2021 child tax credit hit parents' bank accounts in December. A survey by the University of Washington Institute for Social Policy last summer found that nearly three-quarters of parents were willing to take the credit provided to use it to boost their emergency savings.
The CTC will not completely disappear in 2022, but for now it must be returned to the $2,000, and parents will no longer receive the money for advance monthly installments.
The Biden administration and some congressional leaders argued that the expanded credit payments should continue through 2022, but no action has been taken. And while nothing is impossible, a fourth stimulus check is not likely.
As a result, many Americans will likely no longer see these additional federal payments in 2022, though eligible parents will still see the other half of their CTC credit extended to tax returns they file this year.
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Student loan repayments likely to resume
During the pandemic, the federal government froze student loan payments and accrued interest for federal borrowers. This freeze has been extended several times, most recently until May 1, 2022.
There is no doubt that the suspension of payments has been a boon to millions of borrowers. A Pew Charitable Trusts survey last summer found that 59% of borrowers who stopped making payments during the break used the money primarily for basics like food and rent.
Interestingly, only 9% of those surveyed said the extra money was spent on savings.
Despite the push from progressives and supporters for another extension of the freeze or permanent student loan forgiveness, it appears that, at this point, borrowers should plan to repay their loans in the spring:
- Pay less on student loans
- Get the most out of life
- Reduce your interest rate or reduce your monthly payment
Low interest rates for savers
In March 2020, the Federal Reserve lowered its benchmark interest rate to near zero in order to keep markets going and avoid an economic meltdown. In the months that followed, banks across the country cut their own rates to stay competitive.
Although interest rate cuts at banks are normal during economic downturns, they also mean that your money stored in savings accounts is earning much less than in good times.
The impact of the deep rate cuts was especially painful for customers of online banks like Marcus, Ally and Axos, who lured consumers with the promise of high-yield savings accounts that paid interest rates of 2% or more. versus fractions of one percent at traditional banks.
Today, rates on the best high-yield savings accounts range from 0.3% to 0.5%. The Fed is expected to slowly raise rates again this year, but it could take years for consumer bank interest rates to rise again.